Any con­tract by a com­pany in a name other than its reg­is­tered one can­not be en­forced un­less it is rat­i­fied

The Guardian (Nigeria) - - LAW REPORT - Com­piled By Law­pavil­ion

CHUKWU & ANOR V. CHUKWU & ORS (2018) LPELR-45482(CA) In The Court Of Ap­peal

In the Ow­erri Ju­di­cial Di­vi­sion Holden at Ow­erri ON FRI­DAY, THE 24TH DAY OF AU­GUST, 2018 Suit No: CA/OW/243/2017

Be­fore Their Lord­ships:

B MASSOUD AB­DULRAH­MAN OREDOLA J.C.A

AYOBODE OLU­JIMI LOKULO-SODIPE J.C.A

ITA GE­ORGE MBABA J.C.A

Be­tween

1. LAW­SON NNAMDI CHUKWU

2. L. A. S. CHUKWU & SONS NIG LTD

Ap­pel­lants And

1. HON. LOLO STELLA C. CHUKWU

2. MR. MODESTUS O. OBIWURU (By his At­tor­ney Bartholomew Okafor)

3. UNION BANK OF NIGE­RIA PLC

Re­spon­dents

LEAD JUDG­MENT DE­LIV­ERED BY MASSOUD AB­DULRAH­MAN OREDOLA, J.C.A.

FACTS OF THE CASE

UNION Bank of Nige­ria Plc. (3rd re­spon­dent herein) ad­vanced a loan fa­cil­ity to L. A. S. Chukwu & Sons Nig. Ltd and same was se­cured with a landed prop­erty/build­ing known and re­ferred to as Plot 178 E New Ow­erri, Imo State, (forth­with re­ferred to as the prop­erty) be­ing a prop­erty of the said L. A. S. Chukwu & Sons Nig. Ltd. Be­fore fully liq­ui­dat­ing the en­tire loan sum, Chief L.A.S. Chukwu died.

The law firm of B. F. Omid­ina & Co. was em­ployed by the 3rd re­spon­dent to help re­cover the loan. The firm made a pro­posal to the de­ceased fam­ily to ex­er­cise an op­tion to buy the prop­erty at the rate of N5,791,747 (Five Mil­lion Seven Hun­dred and Ninety One Thou­sand, Seven Hun­dred and Forty Seven Naira), which rep­re­sented the out­stand­ing bal­ance of the unliq­ui­dated loan sum.

The 1st re­spon­dent sourced for the money from the 2nd re­spon­dent and paid off the said loan bor­rowed/taken by the 2nd ap­pel­lant and fully dis­charged the 2nd ap­pel­lant from fur­ther obli­ga­tion with re­gard to liq­ui­da­tion in re­spect of the said loan fa­cil­ity and in ex­change, the 1st re­spon­dent claimed that the Law Firm of B. F. Omid­ina & Co in its ca­pac­ity as the agent of the 3rd re­spon­dent, trans­ferred the le­gal ti­tle of the prop­erty to her, vide a pri­vate treaty ar­range­ment (op­tion to buy) in which the law firm pur­port­edly dis­posed of “the pledged prop­erty used as col­lat­eral by L.A.S. CHUKWU (NIG.) LTD” (a name sig­nif­i­cantly dif­fer­ent from L. A. S. Chukwu & Sons Nig. Ltd). How­ever, a month af­ter the pay­ment was made and ac­knowl­edged by the 3rd re­spon­dent, the ti­tle deed to the said prop­erty was not re­leased to her by the 3rd re­spon­dent de­spite all ef­forts. The 1st and sec­ond re­spon­dents there­fore ini­ti­ated a suit at the Imo State High Court sit­ting at Ow­erri, to com­pel the 3rd re­spon­dent to ful­fill the agree­ment it had with the 1st re­spon­dent by ex­e­cut­ing a proper and valid trans­fer agree­ment in favour of the 1st re­spon­dent and re­leas­ing the ti­tle doc­u­ment to the 1st re­spon­dent, among oth­ers.

Dur­ing the course of pro­ceed­ings, Law­son Nnamdi Chukwu and L. A. S. Chukwu & Sons Nig. Ltd (ap­pel­lants herein), ap­plied and were joined as the 2nd & 3rd de­fen­dants re­spec­tively by an or­der of the trial court.

The 2nd and 3rd de­fen­dants (now ap­pel­lants) coun­ter­claimed that the prop­erty be­longed to the L. A. S. Chukwu & Sons Nig. Ltd (2nd ap­pel­lant herein) and not per­sonal es­tate of Late Chief L.A.S. Chukwu. Fur­ther, that the loan, hav­ing been over-paid, the over­paid sum of N1,500,000.00 (One Mil­lion, Five Hun­dred Thou­sand Naira) be re­im­bursed and the deed of re­lease as well as the ti­tle doc­u­ments be given to the 2nd ap­pel­lant, which is the right­ful owner of the prop­erty. The ap­pel­lants also can­vassed that the 1st re­spon­dent, not be­ing a mem­ber of the 2nd ap­pel­lants com­pany nor a di­rec­tor nor au­tho­rized to dis­charge the debt, should be re­garded as gra­tu­itous. The 3rd re­spon­dent on its own part en­tered its de­fence against the 1st and 2nd re­spon­dents’ suit but did not con­test the ap­pel­lants’ counter claim. The 3rd re­spon­dent’s de­fence against the 1st & 2nd re­spon­dents claim was that the man­date given to the law firm of B. F. Omid­ina & Co. was to re­cover out­stand­ing debts and that the du­ra­tion of the con­tract was for three months pe­riod which had al­ready elapsed be­fore the law firm al­legedly en­tered into the op­tion to buy agree­ment with the 1st re­spon­dent. The 3rd re­spon­dent stated that they did not au­tho­rize the law firm or any other per­son to sell the prop­erty and that the mort­gage on the prop­erty was not fore­closed.

Af­ter the close of hear­ing in the case, the learned trial judge found ma­jorly in favour of the 1st and 2nd re­spon­dents and en­tered judg­ment in their favour. He also en­tered judg­ment par­tially in favour of the monetary claim in the counter-claim of the ap­pel­lants.

The ap­pel­lants, be­ing dis­sat­is­fied with the de­ci­sion of the trial court, ap­pealed against the same.

De­spite be­ing duly served with the ap­pel­lants’ brief of ar­gu­ment, the re­spon­dents failed to file their re­spec­tive briefs of ar­gu­ment and on the date slated for hear­ing, the re­spon­dents were ab­sent de­spite ser­vice of hear­ing no­tice on them. Nev­er­the­less, the court pro­ceeded to hear this ap­peal on its merit.

IS­SUE FOR DE­TER­MI­NA­TION

The court dis­tilled a sole is­sue for de­ter­mi­na­tion viz: Whether the lower court in grant­ing the claims of the 1st and 2nd re­spon­dents, was right, and the de­ci­sion be­ing sus­tain­able, hav­ing re­gard to the lower court’s eval­u­a­tion of the ev­i­dence ad­duced in re­la­tion to the plead­ings. (Put dif­fer­ently, whether the 1st and 2nd re­spon­dents proved their case and were thus en­ti­tled to a favourable judg­ment).

AR­GU­MENTS

The crux of the ar­gu­ment by ap­pel­lants’ coun­sel in re­spect of the sole is­sue is that the prop­erty which is the sub­ject mat­ter of this ap­peal be­longs to the 2nd ap­pel­lant which is a cor­po­rate en­tity with dif­fer­ent le­gal per­son­al­ity from Late Chief

L.A.S. Chukwu, and that that fac­tual sit­u­a­tion served as the ba­sis why the prop­erty was not in­cluded in his Will. He called in aid the cases of AFRIB­ANK (NIG.) LTD. Vs. M. ENT. LTD. (2008) 12 NWLR (Pt. 1098) 223 at 241; SALOMON v. SALOMON (1897) AC22.

It was the sub­mis­sion of the ap­pel­lants’ coun­sel that the trial court ought not to have mixed up the 2nd ap­pel­lants’ ju­ris­tic per­son­al­ity with that of the 1st re­spon­dent so as to en­able the 1st re­spon­dent to sup­plant the 2nd ap­pel­lant in the mat­ter of the right to the re­lease of the mort­gaged prop­erty and its ti­tle doc­u­ment.

On the pur­ported sale of the prop­erty to the 1st re­spon­dent, the learned coun­sel for the ap­pel­lants ar­gued that, B. F. Omid­ina & Co., which pur­port­edly sold the prop­erty to the 1st re­spon­dent did not have any au­thor­ity to trans­fer any in­ter­est in the prop­erty as its ex­press scope of power was to re­cover the debt owed. In ad­di­tion, that in law, a mort­gagor re­serves the right of own­er­ship of the mort­gaged prop­erty upon liq­ui­da­tion of the mort­gage debt, and that since the bank had not fore­closed the 2nd ap­pel­lant from re­cov­er­ing the prop­erty, any pur­ported sale of the prop­erty with­out prior re­course to the 1st ap­pel­lant is void.

Fur­ther­more, the learned coun­sel for the ap­pel­lants ar­gued that apart from the fact that B. F. Omid­ina & Co., or any other per­son whoso­ever was not au­tho­rized to sell the prop­erty, the party said to be rep­re­sented by B. F. Omid­ina & Co. was L.A.S. Chukwu (NIG.) Ltd. which is dif­fer­ent from L.A.S. Chukwu & Sons Nig. Ltd. (the 2nd ap­pel­lant, who en­tered into the mort - gage trans­ac­tion in this case with the 3rd re­spon­dent).

Thus, the learned coun­sel for the ap­pel­lants con­tended that the judg­ment of the trial court was per­verse and urged the court to re-eval­u­ate and re­view the ev­i­dence ad­duced by the par­ties and the de­ci­sion of the lower court.

THE COURT’S FIND­INGS

On the va­lid­ity of the pur­ported sale of the prop­erty by B. F. Omid­ina & Co. to the 1st re­spon­dent, or va­lid­ity of the “op­tion to buy” agree­ment, the court ex­am­ined ex­hibit F (Debt Col­lec­tion As­sign­ment) and found that same was used to au­tho­rize the law firm of B. F. Omid­ina & Co. to un­der­take all le­gal means to re­cover the 3rd re­spon­dent’s monies in pos­ses­sion of some third par­ties as loans and no more, and in­vari­ably, there is noth­ing which au­tho­rized the law firm to dis­pose of the prop­erty (if any) used by the listed debtors as col­lat­er­als.

Fur­ther­more, that the prop­erty was mort­gaged to se­cure a loan in re­spect of which the 3rd re­spon­dent had con­sis­tently, per­sis­tently, stri­dently and stren­u­ously stated that the prop­erty was not fore­closed. The Court then posited that both the 3rd re­spon­dent and its agent lacked the power to uni­lat­er­ally sell the prop­erty to any­body, no mat­ter who the buyer may be. The cases of Okonkwo v. Co­op­er­a­tive & Com­merce Bank Nig. Plc & Ors. (2003) LPELR 2484 and Polo v. Ojor (2003) 3 NWLR (Pt. 807) 344, (2002) LPELR 6086 (CA) were culled in aid.

The Court, re­ly­ing on the po­si­tion of the law as enun­ci­ated above, and mar­ried with the facts of this case and ju­di­cial au­thor­i­ties cited in sup­ported thereof, held firmly that the learned trial judge (with due re­spect) erred when he held that 1st re­spon­dent ac­quired a valid ti­tle to the prop­erty in dis­pute and that the 1st claimant (1st re­spon­dent) is the per­son who has the right to the re­lease of the mort­gaged prop­erty and not the 2nd and 3rd de­fen­dants (1st and 2nd ap­pel­lants, re­spec­tively).

On the va­lid­ity or oth­er­wise of the “op­tion to buy” agree­ment, it was dis­cov­ered that the party on which be­half the law firm acted is legally dif­fer­ent from the 2nd ap­pel­lant who mort­gaged the prop­erty to the 3rd re­spon­dent. In this re­gard, the court swiftly pointed out that it is el­e­men­tary prin­ci­ple of cor­po­rate prac­tice that a com­pany is known by the name con­tained in its Mem­o­ran­dum of As­so­ci­a­tion, by which it was reg­is­tered and or in­cor­po­rated and none other. Thus, if by any chance a com­pany is sued or pur­ported to have en­tered into any con­tract in a name dif­fer­ent from its reg­is­tered name, the con­tract would not be en­force­able against the com­pany, ex­cept the com­pany by res­o­lu­tion rat­i­fies it. Con­se­quently, that hav­ing found in the in­stant case that the party rep­re­sented by the law firm is dif­fer­ent from the 2nd ap­pel­lant, which mort­gaged its prop­erty to the 3rd re­spon­dent, ex­hibit A (op­tion to buy ) can­not be held bind­ing on both the 2nd ap­pel­lant and 3rd re­spon­dent.

The court there­after con­cluded that from the pleaded facts and ev­i­dence led thereon by the re­spec­tive par­ties, that the 1st and 2nd re­spon­dents did not dis­charge the bur­den of proof squarely placed on them with re­gard to au­tho­riza­tion pur­port­edly and or sup­pos­edly given by the 3rd re­spon­dent for the sale of the mort­gaged prop­erty.

HELD

The court found this ap­peal to be mer­i­to­ri­ous and same was ac­cord­ingly al­lowed. Con­se­quently, the part of the judg­ment of the lower court de­liv­ered on the 26th day of Jan­uary, 2017 in suit No. HOW/266/2005 in favour of the 1st and 2nd re­spon­dents wherein the lower court val­i­dated the sale of the prop­erty by the law firm to the 1st re­spon­dent, and the con­se­quen­tial or­ders in re­spect thereof were set aside and thus, the claims of the 1st and 2nd re­spon­dents were dis­missed.

In its place, judg­ment was en­tered for the ap­pel­lants in re­spect of their counter-claim in the fol­low­ing terms:

1. It is hereby de­clared that the 2nd ap­pel­lant’s in­debt­ed­ness to the 3rd re­spon­dent has been set­tled and the le­gal mort­gage ex­e­cuted be­tween the par­ties is ac­cord­ingly dis­charged.

2. The 3rd re­spon­dent is hereby or­dered to re­lease the ti­tle doc­u­ments of Plot 178, Hous­ing Area E, New Ow­erri (the mort­gaged prop­erty) to the 2nd ap­pel­lant for on­ward trans­mis­sion to the Es­tate of Late Chief L. A. S. Chukwu.

3. The 3rd re­spon­dent is hereby or­dered to re­fund to the 2nd ap­pel­lant, the sum of N1.5mil­lion be­ing ex­cess money which was paid by the 2nd ap­pel­lant and the re­ceipt duly ac­knowl­edged by the 3rd re­spon­dent bank.

And costs in the sum of N50,000.00 was awarded against the 1st and 2nd re­spon­dents and in favour of the ap­pel­lants.

Ap­pear­ances:

D.C. Den­wigwe (SAN) with him, O. O. Okonkwo, Esq. - For Ap­pel­lants

Re­spon­dents duly served with req­ui­site hear­ing no­tices but ab­sent.

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